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tv   Bloomberg Markets European Open  Bloomberg  May 9, 2017 2:30am-4:01am EDT

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welcome to bloomberg markets, the european open. we will bring you the first traits of the day. alongside mattny miller. here is what we are watching. commerzbank beat the streets highest a estimates. they want to buy more businesses. we asked the cfo about his m&a plans. bs chairman said the central
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bank may announce its move toward tapering in september. we bring you his exclusive interview. .alm in the markets dropping to the lowest levels since 1993 but is the investor complacent? , 30: let's take a look minutes to go into the market opens. the futures index is here in europe, we are seeing slight a little movement yesterday, the cap dropped almost 1% and we are seeing gains and futures there and -- as well as the ftse and the dax. take a look at bunds. investors are buying bunds, pushing yields down, they were this morning and that has turned around. they are selling off the bunds and pushing the yields back up. it will be interesting to see how the treasury trade goes. given the news coming out of the
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u.s. fed. manus: i have the chameleon curve for you, i will show you that later in terms of what the u.s. treasury market is doing. the gmm is the personification of the market stories. the aussie dollar is off and down for a second day. we're waiting for the budget. the deficit. also dragging financials lower. you have that little bit of an offer in the aussie equities, japanese equities also lower. governor kuroda telling the world there is escape velocity. we do not want to be behind the curve. they are stepping over into the commodities. gold is down by .1 of 1%. the shading of gmm is the percentage move in terms of the percentage move and standard
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deviation. a massive moment for the by .8 ofs, wti down 1%. those are your markets. matt is back and ready to go in frank for it. ready to go as ever, juliette saly. bloomberg first word news. juliette. juliette: voting is underway in south korea in a election triggered by clinical and's -- political and corporate scandals. allegations of corruption at the highest levels of government and business has dominated the campaign. along with worries about youth unemployment and the feeling that economic revival is not being seen on the ground. general'sing attorney elliott says 18 days passed between a warning to the white house that national security adviser eiko flynn lied to vice president mike pence and the administration has decision to fire him. she made her testimony to a
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senate subcommittee yesterday. any problems should have been flagged by the previous administration, the white house said. creditia's aaa rating is under scrutiny. the struggle to balance the books has been company did by recession level increases. deficit atpredicted $21 billion u.s. british companies are finding it harder to hire the right stuff. the availability of workers for permanent and temporary positions fell at the fastest pace in 16 months in april according to a report by the recruitment and employment consideration. there is a shortage of applicants across a wide range of industries and brexit may exacerbate the problem. the u.s. says it will continue
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to [inaudible] .o most of the south china sea the fleet commanders held a aiefing in singapore that change in administration met disruption but there was no change in policy. this is bloomberg. ♪ manus: thank you very much. the bank willaid announce a tapering program in september. this is the ecb is clearly on a path to normalization and is likely to remove some easing in a stamen in june. >> ecb's on the path to normalization. following the fed with some delay.
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if anything were to go wrong in the economy they might change that course. likelyhe data, it is they will follow this course. ours: joining us now is macro strategist on our mliv team. s on, trying tor normalize. what do you make of the timeline? his comments are sensible. the data has been coming in stronger. there is no clear signs of inflation. that does not necessarily mean the ecb cannot remove the accommodative policy. his timeline, he did stress they will react as the data comes in. commerzbank,tching
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they are counting on the mullahs asian of policy from central banks as are all the banks across europe. looks like it is going to happen and things are picking up. . looks like things are picking up here. people are worried about valuations. does not look like it is a much better positioned as europe look like it is better positioned for growth in the u.s.? you had this strong diversions in performance equity markets and the economy. what you are seeing now is this narrative has changed, european equities provide sustained opportunity. growth seems to be picking up. it is picking up from a low andl, no one is expect growth through run away. maybe the market was under positioned, underpriced in this outcome of european growth being solid. that their plans are
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to diversion, they are much more convergent and people thought. everyone is super optimistic about the u.s. and negative about europe. they are fully much more similar. matt: very well put. i was talking about the equities more than the underlying economic growth outlook. if you look at equities in the u.s., people seem extremely complacent. the vix index, the fear index on the cboe is down to a level we have not seen since 1993. why is that and is it worrisome? mark: there are a couple of things to look at. we're not getting any realized volatility, that is important. everyone is saying the vix is super low but stuck equity markets are barely moving. we series small changes and we have seen this in a sustained time for many weeks. we are near the record high. you break through and you get the market teasing or a gets rejected and you get a bit of a youection everyone goes
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take profit. we are not seeing that it's really. another land which i discussed iphone the fact that was the -- i discussed before. rather than buying options to check themselves which is the vix is. buying option audi to protect your portfolio. it has reduced a bit. we are not getting volatility. as for valuations there is many ways to say it is overvalued. it looks like they will remain low for a long time, we have ok growth and no real inflation. time forhe goldilocks equities. will it remain like this, perhaps not but equity valuations do not look to out of whack unless you think the economic environment will shift materially in the months ahead. manus: thank you very much. we will understand what the market is. can follow all the market
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mliv.ts at withting income comes in lester mitts its. we talked to the cfo. more.nd much this is bloomberg. ♪
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matt: welcome back to the european market open. we have 60 minutes to go until the start of trading. let's talk about one of the stocks you want to keep an eye on. posting an operating profit in the first quarter, 900 52 million euros just shy of analysts estimates. the reinsurer confirmed its full-year target with us on the phone from munich. here, thanks for joining us. you are shy of the streets estimate, let's say in line. what parts are you most pleased with and what parts do you want to watch more closely? guest: good morning. to be honest, i am rather pleased with everything this time. business of the improved their performance and the result is fully in line with our expectation.
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what are you watching going forward, i know that there have not been any massive costs have those been kept low and your pricing power seems to be fairly strong. series ofhave had a five uninterrupted years of pretty low major losses which is on one hand good for our results. on the other hand, somewhat difficult for the discipline in the market. what we see at the moment as a normalization of [inaudible] technical side has deteriorated but we are happy with it because this is our business and at the same time, we see a bottoming of the reinsurancewards of prices. this makes us confidence that things are slightly improving from now on. manus: a very good morning to
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you. your first quarter profit was driven by a 37% in investment income. i read governor kuroda's comments. are you concerned that these equity markets are overly if you save and overly -- effusive and buoyant? our exposure to equities is moderate. we have performance of the last couple of months and we think that this does not fully reflect the overall especially geopolitical risks we're faced with. are85% of our investments invested in income securities and therefore we would welcome a normalization of the ecb policies.
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have a new cfo in wonder, allianz is doing things investors like, pingback some of the share profits. do you see anything possibly, are you able to do something like that, is that a possibility for munich re? guest: we have been buying back shares for years and we have the best track record in the industry. eholder participation in our success has been underage adopted -- uninterrupted. there is a slightly growing dividend and more or less constant program of share buybacks. we are very much in favor where our at times opportunities for organic or
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quiet growth are somewhat limited by the circumstances. manus: one final question, you hinted you would welcome as the change or the road to normalization by the european central bank, do you see any of the changes in language coming sooner than what the market anticipates, do you think they will hint of a change timeline and rhetoric in june? give me your timeline and choreography of what you hope in terms of the ecb. guest: we help language will change in the course of this year and then there must be concrete steps, the latest in 2018. because the differences between the u.s. and most probably also central.k. and europe, are no longerrope
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sustainable. that does not work overtime. therefore, pressure is too high, and also, these policies have been appropriate for the height of the crisis but not as it continues element of steering. matt: thank you very much, the cfo of munich re joining us after profit rose and investment gained 30%. 85% of the money is in the fixed income market. juliette saly is standing by. juliette: thank you. commerzbank is benefiting from a rising income of securities trading six months after it rolled out a strategy to get back to business. net posted first quarter income of two hundred 17 million euros ahead of all four analyst estimates compiled by bloomberg. commerzbank is embarking on a turnaround strategy that will
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see more than 9.5 thousand jobs passed by the end of 2020. 20%t-quarter profit fell missing analyst estimates after the company had to pay higher fees and keep a nuclear reactor off line for longer than anticipated. germany's biggest one generator posted net income toddling -- totaling 512 million euros. course.firmed it is on and breaching its duty to feetholders by rejecting 29.5 billion dollars takeover. elliott has asked that dutch court to clear the way. saying it would be damaging and not in the best interest of the company. that is your bloomberg business flash. manus: thank you very much. let's stay in asia.
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it has been a fairly tumultuous recental period in memory. south korea go to the polls and choose their president. the election was triggered by the impeachment of the former president. joins us. flagship policies, what is the key debate, is it about governance, is it about trade, is it about north korea, what is the flagship healthy? -- policy? shery: all of those are key issues. if you take a look at this election i would have to say that it is about the economy. bridging the income gap. reform,alk about table conglomerates, that is a key issue. this is an unprecedented election after the historic ouster of president park over
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corruption allegations. how to reform the conglomerate is a key issue. there are dozens of bills in parliament ready to be passed so the new president will have to come along and deal with that first. also when it comes to the economy, the youth unemployment rate has doubled that of the general population so a lot of hear areat i talked to complaining about the fact that we talk about a recovery in south community -- korean economy but when it comes to the situation on the ground, that is not the case. it is hard to find jobs. the parityhat to be of the new president. -- a 60% of% of the the 40 million eligible voters have cast their ballots. it has been raining on and off but you can see that constant stream of voters heading to the polls.
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a lot of interest here on what will happen next especially when it comes to how they deal with north korea. the leading candidate has been more open toward the north after nine years of conservative rule at a tough stance against pyongyang. manus. manus: thank you very much. matt: we are minutes away from the open. just seven minutes to go here until the start of cash trading in europe. had a big beat this morning, germany's second-largest bank beating the highest estimates on the street. it does not have cash to spare. up next, your stocks to watch. ♪
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matt: welcome back to the european market open. i am matt miller in frankfurt alongside manus cranny at our headquarters in london. just about for minutes to go until the start of cash trading. you want to watch commerce bank, --commerzbank. aswing away the range trading revenue increased. co.us: keep an eye on adec great numbers for them in italy. march and april revenue is up i 5% to 6% and the margins down.
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the clock is ticking down to the market open. a slightly better open and european equity markets. and commerzbank all in focus. this is bloomberg. ♪
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♪ coming through from the likes of adecco and commerce bank, setting up the agenda for the trading day. is volatility suppressed? is it something ominous we should be more concerned about? first earnings season there haven't been problem mornings. matt miller, good morning. matt: i am back from a short vacation. i went away for the french elections.
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i thought we would see more movement in currencies after the results. we don't see a lot of movement in the euro today or yesterday. 109.06 is what we saw. surprising strength in the pound at 129, 32. manus: thank you, matt. london, there you go. open, 7306n market in london. we want to keep an i on the dax as well. ease markets are looking at ,ittle frisky, the sf --s&p volatility is suppressed. away from repression and into the high lands and of planes -- .plands of the european equity
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anna: let's talk about where we are trading on european equity markets. this is where we are on the stoxx 600, up by 1/8 of a percent. one of the companies reporting today, a host of german names coming through, commerzbank, zen lando giving numbers to the .arket but also adecco we see energy and discretionary moving higher. utilities on the back foot down around .25%. we will see where commerzbank opens up this morning. the fixed income story in the u.k., gilts open this hour. 10-year gilts 1.165%. the story this morning was all
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about labor markets in the u.k. and the potential for later -- labor shortage. a great conversation about whether this will be a constructional -- structural inflation goes and how that would factor into the bank of england's thinking. watching the gilt market, be aware we have the meeting on thursday and the results of their deliberations. no change expected. we have a campaign underway. any officials are not as able to speak as they were. but we are getting inflation reports. asian-pacific, we have this to round off the session in asia. this chart goes back to the start of the year. this is the year-to-date chart, but with the asian-pacific down a touch during the session. we saw the selloff in china positive. south korean stocks are closed. the us trillion market came under pressure because of those financials. manus: thank you very much.
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denmark, these are the movers. your stoxx 600 to see what is driving these markets. the number one and two companies are pandora. doris first-quarter earnings beat estimates. -- 7% rise, taking them up to the top of the stoxx 600. nets on the other side, they have delivered numbers that beat on estimates as well. they raced the four year profitability 1.9 billion. the market had 1.80 6 billion. credit suisse on the loser side. this is one of those stories we will run. credit suisse, a small story. that is the piece of news that you have on credit suisse this morning.
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apart from that, nothing that i can see really that is going to drive that story more aggressively. those are the ups and downs. matt, how is your commerzbank looking? you mentioned credit suisse and i want to take you to an aside i was looking at this morning. commerzbank is germany's second-biggest bank at 11 billion euros market cap. deutsche bank is about 40 billion euros. together, the two biggest banks in germany are 50 billion euros. and france, you've got stock jim and bnp paribas that are worth 25 billion. in switzerland, credit suisse and ubs that are worth over $100 billion. it is interesting to see that two biggest banks are so much smaller than the banks of
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france and switzerland even though they have comparatively smaller economies. take a look at commerzbank game, 2%, unimpressive gain when you add it to the 30% gain they are showing year-to-date. the reason they did so much better than the industry was 270ing for in profits at million euros, much higher than the highest estimate of analysts and bloomberg news and the frank for office. they did that because trading revenue was up 887 million euros. that is a business they have decided to scale back last year, so they are scaling that back but making more money and adding more to the bottom line. i'm looking forward to talking to stefan angles a little later this morning. about themt he says turning that decision around maybe. i know they want to do some m&a
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because they want to add 2 million clients. it should be an interesting interview, manus. manus: looking forward to it. let's bring in our guest. the ceo ad nauseam asset management. to getws, matt is going together with cfo. the french have emmanuel macron, a former banker in charge. european banks could have a good time with the ecb in place. draw the landscape for me. >> europeans are looking good with the exception of italian banks. the banks are trading at reasonable evaluations. performed 18% on the stocks 50. manus: these are the global banks. commerzbank is at the top but the average is 17.
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commerzbank traded up 36. they do offer value on price-to-earnings ratio when you look at the broad european sector. they also performed really well in data. you got a weaker euro. the euro was 13% undervalued on u.s. dollar.ersus you have the potential for interest rate hikes priced in to one printers -- interest-rate europe. that would be positive for banks and how well they do. day, all off the the geopolitical uncertainty around the french elections has been removed and you have the german elections coming up in september, merkel looks to win that and it will be straightforward. the risk has been taking off the table. volatility as you have seen is back down at levels we last saw
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in 1993. when you look at the vix, likewise european volatility index well. this is a good time and valuations support the argument. matt: i wonder what you think -- since that risk is off the table, at least the european political risk, does that set free european banks to spend more money and consolidate to start churning a little bit? >> definitely. we like to see banks hiring more, paying more and actually that weon growth areas have our leasing come through in the numbers. but you are absolutely right, matt. this is an environment where european banks should drive and do well. there is no reason why one shouldn't have an allocation in this sector. manus: matt and i just had a conversation with the cfo.
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he is keen to push this conversation on. keen torman at ubs is see the bank move more aggressively. do you think we will shift our expectations as the weeks go on between now and june on the timeline for the european central bank? curve,s linked to yield which is linked to banks? >> absolutely, you have interest rates at 0%, hard for banks to make money when rates are so long. the lending facility we saw in march was very positive. you had a massive uptake. both has to be financed. this is not a freebie. usually that is fiscal spending and bank lending and we need to see banks lending more in europe in order to see economies improve. this is starting to come through in gdp numbers and inflation numbers. manus: and the pmi numbers were
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good as well. a lot more to get through before the show ends. at asset management. he stays with us. matt? are: one of those things we going to continue to talk about this central banks and their affect on currencies. we are talking about the krone in the crosshairs as the meansthening currencies something for the icelandic central bank. we hear from the governor at 8:30 u.k. time. us, is it paper time here in -- taper time in europe? weberrom that with axel on when the ecb will talk tightening. this is bloomberg. ♪
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♪ manus: 8:13 a.m. in london. volatility in europe is down again. equity markets up. volatility dropping by another 15% this morning. if you click on your mliv, there is a wonderful line. , dividend will be short-lived. strong fundamentals will drive the market higher. long live europe and its equities. deutsche bank's asset management
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cio says compared to the u.s., europe is on a historical basis. let's get a perspective on markets. nejra cehic joins us. nejra: a bit of perspective in the mid cap sector. interesting moves this morning, starting with pandora. his company has been expanding beyond the charm bracelets into other products like rings, jewelry and other necklaces. sales growth of those exceeded 40%, pushing earnings to a beat on analyst estimates. we are seeing the stock gain today. highest in a month. still up .7%. one of the worst performers on the stoxx 600 is micro focus international. application management solutions and we see it drop the most since june 2016. this after hp software revenue was down about 10% in the year.r year on
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down about 10% and the stock also down almost 10%, off by 9%. central costs -- one of the worst performers on the stoxx -- hitting its lowest since february 2016. this could be due to the fact that the u.k. conservatives have confirmed a cap on household energy bills if theresa may wins the election. news.e seen moves on customer losses continued this year with warm weather training consumption for the u.k. power producer. matt? matt: thank you very much, nejra cehic with a look at stocks. we're going to focus on commodities now because iron or is under pressure again in asia. the futures there sinking, the contract funk on concern that mine supplies will rise just as
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china's mills enter a weaker. for demand and really, but china duan is still with us. for the olde economy businesses, china is done with their orders for the year. what you see for iron ore and commodities because of this asian sort of slow down or finish? yogi: the concern is definitely on the back of china. the exports numbers haven't been good. we are optimistic commodities as an asset class and emerging markets going forward. things to remember is we do have significant global growth in the system. we have a strong dollar, which is likely to weaken going forward, as well. we are starting to see inflation around the world of too. this is the fourth commodities market, particularly iron or in the pricing we have seen now. manus: there has certainly been
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a smack on iron or. the question is if you believe china holding its levels. goldman sachs had a lovely this morning. i have crunched the numbers. cycles and they would say there is no need to worry that the commodity complex is quite well. if you want to pick up this chart, have a look at 8442. they say hiking cycles do well, commodities performed the best in this period. that has the chime of logic for me. a bit of inflation, commodities do ok. yogi: absolutely. as a general rule, if you have interest rate increasing, it is on the back of inflation. global growth supports the commodities argument. sense, it is
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finance 101, you would expect to see this happen going forward. matt: i'm still blown away by the chart. that is a fantastic set of lines there and it tells a great story. i wonder if that story continues foretelling, because the china situation seems to have changed everything. is it different this time because it is china? yogi: i don't think it is different. china is still growing at 6.7%. we have low valuations, a currency that is weakening and the dollar looks like it will weaken going forward. but this is an ok environment for china rather than longer-term. we expect significant growth, certainly at the high six level. china supports this as well. it is not just a china story, it is global growth throughout the world, including emerging
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economies and emerging companies and we are starting to see through -- good data through the u.s. too. manus: governor kuroda in japan is talking about animal spirits and a global recovery. you stay with us, a little more from our ceo of hassium management. up next, a week for fed speak. we break down what the cleveland chief had to say about the path to normalization. more to come. this is bloomberg. ♪
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♪ manus: 8:21 in london. i live shot of the generals heading off. russia is at red square in moscow and it is a celebration of the end of world war ii. speaking over there in terms of troops and the next generation of russia in red square as well. ok, that is mr. putin. let's get to juliette saly the mid-is -- business flash. commerzbank is benefiting from a rising income from securities trading, six months after it rolled out a strategy to scale back the business. the bank posted first-quarter
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euroscome of 217 million ahead of all four analysts estimates compiled by bloomberg. commerzbank is embarking on a turnaround strategy which will see more than 9.5 thousand jobs cut by 2020. profits fell missing analyst estimates after the company had and keep a nuclear reactor offline longer than expected. 95 million euros. it is on call to increase adjusted income as much as 60% this year. advisers says the duty withholders was breached the takeover. elliott has asked a dutch court to make a way to oust the chairman. a vote on the motion would be damaging and not in the interest of the company, it was said.
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shares rose in extended trading after the world's biggest hotel operator reported strong results. forecast was between 1% and 3% this year. revenue exceeded expectations in north america and europe. saudi arabia and russia have signaled they could extend production cuts and we will get more of that story, but that for the moment is your bloomberg business flash. juliette, thanks very much for that. there is a new call for rate increases in the united states with the fed bank of cleveland urging colleagues to deliver on the gradual tightening of policy that they have for spoken. thatberg news was told moves need to be made to ensure the economy doesn't fall behind.
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her comments came after a speech in chicago. to remainn portland vigilant against falling behind as we continue to make progress on our goals. especially given the low level interest rates and the large size of our balance sheet. we know that monetary policy affects the economy with long lags. policy actions have to be taken before our goals are met. are back with the ceo of hassium asset management. we hear this, but also jim sounded a little dovish as well. what do you expect for the fed in 2017 and 2018? 100% rob ability of a rate hike is already priced in. i know the probability is around
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60% when you look at futures markets. three hikes, 14% looks a little far-fetched. the problem with the fed increasing rates as much as suggested is there is too much quantitative easing in the system for the u.s. to do it as quickly as they would like to. they are concerned about inflation numbers. we have inflation coming out on friday, which will likely increase. it is hard to see three hikes on the table. we are comfortable with two. that is how we are investing. manus: thank you very much. assets the ceo of hassium management. up next, we will talk about the eu wrestling with negative interest rates while iceland has the opposite dilemma. amid speculation that iceland may be about to take up. a discussion with the governor of the icelandic central bank. he discusses all of the nuances
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of monetary policy. the gray day in london. up. is trading higher, a temporary moment of reprieve. the debate continues, on bloomberg.
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of the billboard music awards just by using your voice. the billboard music awards. sunday, may 21st eight seven central only on abc. ♪ matt: welcome back to the european market open. i am matt miller alongside manus cranny. commerzbank has beat the highest estimates with profit. buy more business. we ask the cfo about his m&a plans. the ecb's next steps. ubs chairman axel weber tells bloomberg the central bank may announce its move towards capering in september. we bring you that interview. extraordinary calm in the markets, especially the u.s.. the vix drops to its lowest
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level since 1993. but is investor complacency in america warranted? welcome to "bloomberg markets: the european open." i'm matt miller in frankfurt. because of this interview, i will go on a little. we have manus cranny filling in for guy johnson in london. you get it, you see, all, a nice mix up. three hours of me. european equity markets, german exports bolstering the german story. dax up by 1/8 of 1%. german exports rising for the third month in march. production up i-4 tenths of 1%. saying in aeutsche relative sense, these offer better value than in the u.s.. this is the complexion of what
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isdriving the markets or it basic resources. oil and gas, industrials and commodities rising. oil up .5%. copper flat, but in the green. 0.8% -- 08%. it is the commodities side that is giving support to the market. back to eu policy and the makers of that, weighing the merits of negative interest rates. one central bank having the opposite dilemma. iceland. 5.7% is considered to hide by some. kathleen is joined by the governor of the central bank of iceland read right to see you this morning. go easy on him. think it is interesting. he set the stage with the governor of the central bank of iceland, what is going on in the ,urrency, driven by tourism
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changing capital controls, a volatile mix but he is the guy who has to figure out what it means for the economy and monetary policy. welcome. >> thank you. i have to start by asking what is going on with the economy. there has been a big surge in tourism and this is something that the exchange rate is being buffeted by. what is driving this? hit by oneis being positive after another. we have record growth in 40% increases in tourism last year. coming off a very big increases in the last two years. comes in an economy that in 2015, at full employment. we grew at 70 -- 7% last year. markets, labor market
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and the -- that is to be expected. kathleen: what is going on with the currency controls? iceland had a crisis years ago and you are on sound footing now. he started moving capital controls around october of last year. a couple of months ago -- in march you did the remainder of that and the currency is skyrocketing. surging 4% against the euro, 6.5% against the dollar. why did iceland do that? yogi: it was not a mistake. has not changed since we moved the controls. the bulk of the appreciation and that wasfore part of the problem really because the currency was appreciated because of strong foreign currency inflows because surplus,m and we had a
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8% gdp last year. that is why we lifted capital controls from outflows because we wanted more outflows and the market has been more stable since then. the central markets by much less fx been in the second half of last year. so i am hoping we are going into a more balanced situation and overall, it has done very well -- the ability has been preserved. kathleen: and interest cut that didn't stop the krone from stabilizing. the questions about what this means for inflation and the economy. you have a policy meeting, what are you going to be debating on may 17? mar: i am not really able to talk about what we are going to do. into my silence. . is what is important here
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interest rates in the second , we are not year targeting the rate as such. great success with our monetary policy lately because iceland historically is an inflation-prone country. to --ion has been closed close to target for the last three years. it was only last summer that expectations went to the target and have been there since. we have concluded that we can keep the inflation target over the medium-term with lower interest rates number possible before. it is quite possible that going forward, we will be able to -- somewhat further, even if we policyght -- need tight for risks in the economy.
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that is what we are dealing with. >> the finance minister has urged you to cut rates. you are saying at some point, this is a possibility? that, wen't comment on will wait and see. the economy sits monetary policy based on medium-term inflation prospects. not as a separate goal. we will have to wait. rates in iceland will come down and that will be reflected. because now, we have a very high national savings rate. we have current account surplus and the positive international investment position'we have more assets abroad. typical for economies
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like switzerland, where the rate starts to reflect that. this is not something that happens overnight or immediately. what happens next week we will have to wait and see. kathleen: what about talk of changing the currency regime and having some kind of trading band, even a paint of the euro to keep it more stable. some have complained about speculators in the krone. theyou in favor of changing regime and doing something where there is more control over the krone? thatwe have to be clear there is actually no -- we are not in the mode of discussing that for immediate decision. the government has set up a committee to look at all potential options. this is one of them. another option is to keep the been verywhich has
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successful. target inflation is at and we are able to use interest to even out fluctuations in the real economy. the fluctuations lately have mostly been benign. because reflecting -- of the good fortune that we have had. shows it is difficult to up in a capital moment. in the 1990's, many countries went from having -- two more flexible rate. you need a lot of discipline in fiscal policy. is iceland ready for that? i'm not so sure.
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but for thetion, time being, we are operating under the currency and all policy decisions are based on the current system. happens in the future remains to be seen. kathleen: let's broaden this out and put you in the context of global central banks. we spoke to axel weber earlier. he expects that the ecb is going to announce plans to taper by june and start doing that tapering by september. in a nutshell, how will that affect iceland? mar: very well because one of the problems we face is that the interest rates we need to stabilize the domestic economy are higher than interest rates in the rest of the world. we have a big interest rate differential and that is, of course, a target for capital inflows. with the special visa
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requirement, that is something we want to have. i would welcome the very much. kathleen: thank you so much for joining us. he is the governor of the central bank of iceland, a big policy meeting next week. i'm going to send it back to you now, manus. manus: thank you very much. you weren't easy in any stretch of the imagination. no governor saying there was immediate decision on the new monetary regime and he can hit his inflation goal with lower rates than before. great job. and remember, if you are a bloomberg customer, hop on to your terminal and you have tv . you can get all of the streaming through the show or the charts. onrything that we show you the bottom of your screen and you can ask using the ib function to have a chat with the producers. sarah is in the hot seat.
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matt? matt: yeah, earlier we were talking with yogi about the fears on china's economy really hitting commodity prices. the price of underlying commodities. we are going to talk for investors through the outlook of the commodities miners, precious metals and miners. coming up next, this is bloomberg. ♪
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♪ matt: welcome back to the european market open. i am matt miller in frankfurt alongside manus cranny in london. a day after markets react did negatively for french futures, we are seeing our first french equities, weridge are seeing gains. equities in europe today, indexes up but the strongest gains are the major indexes are in france after the cac fell 1% yesterday in reaction to news that had been priced in, the win from emmanuel macron. let's get to nejra cehic with individual equity movers. nejra: starting with commerzbank rising after first-quarter net income beat. we've seen the stock rise as much as 3% in the session, heading for the highest close december 2015.
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up 1.7%. in the first quarter, commerzbank and a fitted from a rise in trading income. this is after it announced a strategy to scale back that business. is ono said commerzbank track with that turnaround strategy. we are talking about 9600 job cuts by the end of 2020 and the sale of its equity markets and -- commodities unit. trading did well in the first quarter. eon also gaining. the first quarter earnings report without cost related to whatuniper unit, that is we are seeing here. that unit was spun off in september and the numbers came in as a bit of a disappointment. first quarter adjusted net income dropped 20%, missed expectations. we saw the stock hit its lowest since april 23, but picking up and reversing those losses up .5%. finally, munich me -- muen
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chener,, the investment result gaining 37%, helped by a stock rally. even the primary insurance posting a profit but first quarter net miss. that is perhaps why we have seen the stock decline, a three-month low. witheo spoke exclusively bloomberg earlier in the program and said he was hopeful the ecb will start to taper next year. >> it doesn't work overtime. and alsois too high these policies have been appropriate for the height of the crisis, but not as a continuous element. nejra: globally, the low interest environment has been a challenge for insurers. manus: it has, indeed. there.oundup let's get a first word news from juliette saly. koreans haveth
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been voting all day in an election triggered by political and corporate scandal. about tradeoncerns ties in its increasingly aggressive northern neighbor. a pledge to attack the pollution problem. p.m. local at 8:00 time, midday in london. --n-claude juncker said he brexit negotiations with theresa may. in an interview, he said publication of the comments were in -- a serious mistake. former acting attorney general sally yates said 18 days passed between a warning for -- to the white house that michael flynn lied to vice president mike pence and the administration's decision to fire him. to aade the testimony senate judiciary committee yesterday.
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president trump suggested that problems with michael flynn should have been flagged by the administrator -- previous administration. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. manus: thank you very much. what are our big concerns and markets? ers, china,s min rendering a weaker. , -- weaker period. what is the next move and are our concerns warranted? that's welcome our next guest. the senior mining analyst. welcome to the show. -- we havee sense skewed our charts a little this morning but i will have a little more. we are iron or, nickel and copper. there is a bit of a worry in markets. we are worried about supply, iron or. there is a one-year chart. you would say in your notes what we have to look at is metallurgical coal, iron or, the
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worst performers. i need your view. take me into your view on the basket as we look at these. thehere is no question chinese industrial recovery was very positive for commodities during 2016 and it led to quite an aggressive restocking across the supply chain. industrial activity looks like it has peaked in china. certainly sentiment won't be as positive. now we're going into a typical cycle where you see some the de-stockingivity -- . the downstream is waiting for the pulldown in inventories before the by things like iron ore to make more steel. it doesn't bode well for both commodities like iron ore. copperhink that zinc and -- conditions are still good on
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the mac -- demand side. we are not concerned. on the supply side, things are relatively tight. copper, we had almost 10% production off-line at one point this year. three of the largest mines off-line due to number of reasons. strikes where government intervention, etc.. matt: the interesting thing about your research is you are longer-term -- your longer-term view over five years is that these metals have a good run ahead of them. but if you take a look at the individual miners, the stocks, you would think there commodity baskets are all going to deteriorate. what do you mean by that and how do you measure it? from spot levels, if you calculate on aggregate the movements in the baskets
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overtime, on spots levels, you will likely see deterioration. that is an aggregate call and the reason we cd cherry ration that so many miners has significant exposure to iron or. they are a big part of the earnings makes and we are to fall $50 a tank in the second half of the year, it has been on call for a while. the correction we are seeing over the past few weeks is really overdue at this point. manus: upgrading glencore, up -- trading to 95. you talk about earnings growth and the propensity to return cash. utterly to admit, turned this story around from where we are. a big bullish call for you there. alon: absolutely. we were sitting here are year ago. implosion. we were talking bankruptcy. they put in place a very
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realistic restructuring plan with the dispose of non-core capex,'s costced significantly. they are in a fantastic position and on our forecast, we expect them by the end of the decade to be. they have an opportunity and the propensity to do so because management owns close to 15% of the business. which is unusual in the mining sector. there is a clear incentive to return cash to shareholders. -- arehas the shift down these companies leaner and meaner, fighting machines and what we know? we -- i should say that glencore, he and is the chairman of bloomberg lp,
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a senior nonexecutive director and glencore. you can't say i haven't learned compliance. are we leaner, meaner and fitter? alon: certainly. the mining companies have come through. over four years, one of the largest -- longest bear markets we have seen. capex downed them, 70%. profitability gains have been pushed through. there is a much lower cost base and in many cases, it is structurally lower. these companies are prepared for any weakness in commodity prices. the balance sheets have been repaired. their messaging has been consistent. even though commodity prices they saidrd in 2016, their priorities remain their production, cost reduction and productivity gain. that is manifested -- has manifested in very strong balance sheets. referenced billy,
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and you think they are due the sharpest rise in there commodity basket, but the much longer term and -- talk me through that please include your oil call because i think you see $72 a barrel by the end of the decade? alon: that is right. , it does have a decent commodity price outlook that really only starts to play out from 2019 onwards and that is really because of that call on oil. normalization in supply and demand fundamentals, oil rising towards that $72. we expect inventories to be drawn down by that point to support that price increase. manus: alon, thank you so much. matt? matt: i am looking to headlines
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that we are getting from commerzbank. conference call right now, the engels is expecting higher loan volumes in both corporate and personal finance. a retailing story and they are trying to add 2 million customers by the end of the decade. i will interview him in the little bit. i am going to go to commerzbank tower in frankfurt and ask about m&a. one way they want to get more customers is by buying them. i am to ask if they have any targets already envisioned. manus? matt, we really want to know in terms of those targets. the turnaround has begun building. where is the flow in the investment community? the investment of deutsche bank, they brought back 50% of flow business.
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tom keene is visiting london for the rest of the week. guy johnson will take you through the next couple hours of programming. equities higher in london. 7324. this is bloomberg. ♪
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>> volatility takes a backseat. is there nothing to fear? sellerwill act after his holiday. will bunds reach escape velocity? louvre isiree at the over, but can macron bring the french to the after party? this is "bloomberg surveillance .: i'm guy johnson, back in

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